Better Markets Files Amicus Brief Supporting SEC in Ripple Case

Better Markets Inc., a non profit financial markets organization, has submitted an amicus brief supporting the United States Securities and Exchange Commission (SEC) in its ongoing lawsuit against Ripple Labs Inc. The brief argues that Ripple’s XRP, the cryptocurrency issued by Ripple, qualifies as an investment contract under the Howey Test and should be classified as a security.

The filing, made on January 22, 2025, emphasizes the need for regulatory oversight to protect retail investors, citing legal inconsistencies in the district court’s prior ruling favoring Ripple.

Ripple XRP Transactions on Trading Platforms Satisfy Howey Test

Better Markets claimed that XRP sales meet the test of Howey which is used to determine whether an offering qualifies as an investment contract. The organization emphasized that retail investors buying XRP on trading platforms definitely meet Howey’s third element where the investment’s profits depend on the efforts of others.

The brief noted, “The purchase of those securities by investors on trading platforms does not change their nature.” Better Markets criticized the district court ruling and pointed out that the decision was based on the definitions of securities in the statute, which is inaccurate and contradicts the prior legal rulings.

Better Markets pointed to the district court’s ruling as being at odds with the Supreme Court’s definition of an investment contract under the Howey Test. Also, the filing acknowledged the inconsistency of this decision with other courts decision in other cases involving similar matters.

Furthermore, the district court is also said to have erred in not taking into account the economic realities of the offer and sale of XRP. Especially Ripple’s marketing of XRP to the retail investor. It claimed that Ripple used investor anticipation of gains from its work, which supported the argument that XRP is a security.

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Retail Investors Face Potential Risks Without Regulation

The filing also contained concerns as to the effect on the retail investors in case cryptocurrencies such as XRP are not governed by the securities laws. According to Better Markets, the district court’s ruling offers significant protections to institutional investors. It leaves retail investors exposed to risks in a highly volatile and largely unregulated market.

The organization added that, “Crypto investment offerings are still on the rise, especially with the participation of retail investors.” Furthermore, it highlighted that such offerings remain vulnerable to market manipulation, volatility, and illegal practices. This often result in significant losses for investors.